How To Effectively Measure and Understand Your ROI

Meredith St. Louis About The Author

March 10, 2020 at 10:15 AM

How To Effectively Measure and Understand Your ROI

In terms of advertising, return on investment (ROI) means the sales you accumulate as a result of your advertising efforts. Unfortunately, many businesses struggle to effectively measure ROI. An increasing number of business owners are realizing the importance of calculating and understanding the ROI of their advertising efforts--and how matching those efforts to their overall goals can help increase their ROI.

Determine Your Unique Goals

Not every campaign's goal is to acquire new customers--which means that you can't always calculate the return on your investment in terms of the number of customers who actually make purchases due to your campaigns. Before launching a new advertising campaign, you must start by deciding what your goal is. 

  • Brand awareness. Do you want to raise awareness about your brand? Help more customers become aware of what your business has to offer, who you are, or what sets you apart? Customers may need an average of 8 "touches" with your brand before deciding to make a purchase. Simply raising brand awareness can make a big difference, and influence future sales.
  • Increase customers. Is the purpose of this specific campaign to convert potential customers into a new customer? You might, for example, have a goal of moving a potential customer through a particular stage of the sales funnel--or selling a certain percentage of prospects. 
  • Bringing customers into the marketing funnel. At the earliest stages of the marketing funnel, customers aren't yet ready to make a purchase from your business--but by bringing them into the funnel, you substantially increase your odds of a sale when the time is right for them. 
  • Increasing web traffic. Website traffic isn't always directly correlated with customers who want to make an immediate purchase. You may simply be raising awareness of your brand, educating potential customers on your business, or sharing industry information that will help position you as an expert in your industry. 
  • Increasing foot traffic. Your goal may be simply to bring an increased number of customers into your business. 
  • Increasing sales. You may not need to make a new conversion, but increasing the value of existing customers and encouraging past customers to come back for future purchases can help towards your goal.  
  • Growing your social media presence. Your social media reach can help position your brand and establish your position within your industry. 

Use Key Performance Indicators That are Directly Related to Your Goals

The key performance indicators (KPIs) you use should be directly related to the goals you set. Your website or social media dashboards may be filled with data, but if that data doesn't relate to your specific goals, then it can be difficult to see the ROI on your current campaign. You should also focus on the metrics that are directly related to the type of marketing campaign you're running so that you can best interpret your KPIs.

Running an email marketing campaign, you might focus on:

  • Click-through rates - how many customers click through from the email
  • Open rates -  how many customers actually open the email
  • Bounce rates -  how many customers click quickly away from the email--and when they do it

When attempting an increase in sales, you will want to calculate your ROI with this formula: (return - investment/investment) x 100. This will effectively display the percentage of increased sales you received due to your efforts. 

While running a social media campaign, you may want to focus on:

  • Engagement rates, including likes and shares on your posts during the campaign period and even for some time after
  • New followers or fans on your brand’s social media accounts
  • Leads acquired through links and CTAs distributed on social media 

Bringing customers directly to a landing page, you may want to focus on:

  • Traffic directly to that page
  • Unique visitors to that page
  • Time spent on the page
  • Actions taken from the page
  • Bounce rates

Understanding Your ROI

Measuring ROI may look different for each campaign, depending on the specific goals you had set for your business. For a better understanding of the return on the investment of your campaign, consider the following.

  • Know the why. Understand why the metrics you're looking at are important and what they mean to your marketing efforts--and to your business. 
  • Measure consistently. All of your metrics should be analyzed through the same platform and using the same formula so that you're looking at accurate information, not just a dashboard of analytics. 
  • Try using a CRM system like HubSpot to automate processes for you. This system will consolidate information and provide a better layout for your data, making it easier to keep up with it. 
  • Revisit your goals regularly. Make sure you're taking a look back at your goals: what they are and how you're endeavoring to reach them, as well as how your current efforts are contributing to those goals. 
  • Work with a media partner. From the beginning stages of campaign planning to the post-campaign evaluations, working with a media partner can help you to understand your ROI and measure it effectively.

Understanding your ROI is critical to measuring the success of your marketing efforts. In order to effectively measure your ROI, you must have a solid understanding of the metrics that you're measuring and how they fit with your overall goals. Don't get distracted by metrics that have little to do with your actual goals. Instead, focus on how your marketing efforts fit within those goals and what metrics will help you better measure the return on your investment. By partnering with a media company they can help to set the goals and effectively read and analyze the results so you’re able to have a true understanding of the success of your campaign. 

The Ultimate Guide to Measuring ROI_CTA